Chapter 8 Flashcards
Can IRA’s be invested in life insurance?
No.
Should an IRA ever invest in muni funds?
No, because they are already tax-deferred?
What is the max contribution and catch up contribution for a traditional IRA?
5K and 1K
How are IRA withdrawals taxed?
Ordinary Income.
For Traditional and Roth IRA’s, what is the contribution age limit?
70 1/2 for traditional IRA and unlimited for Roth. Roth can also begin distributions at any age.
What is the maximum contribution for a SEP IRA?
49K
For a tax deferred compensation plan (401k plans), how are taxes handled?
Income taxes are deferred on contributions until distributions are taken from the plan. However, ,contribution amounts are still subject to social security, Medicare, and state and federal unemployment tax.
What 4 things must a fiduciary use when using their discretionary power?
Care, skill, prudence, and diligence.
According to ERISA, what 4 items does an Investment Policy Statement not need to contain?
1) Specific criteria for selecting securities.
2) Compensations arrangement for the I/A.
3) Summary plan description.
4) Tax treatment of specific investments.
What is under section 404(c) of the ERISA guidelines which apply to QRP’s?
Safe harbor provisions. These provisions are designed to ensure that participants in QRP’s are provided certain rights and provisions.
Who would benefit most from a defined benefit plan?
High salaried employees near retirement because benefits are calculated based upon compensation, years of service and age.
What is a Keogh Plan (HR-10 Plan)?
A Keogh Plan is a qualified, tax-deferred retirement plan for self-employed individuals that can be set up as a defined contribution plan or a defined benefit plan.
What is a 403b plan and what are they prohibited from investing in?
It’s a tax-sheltered annuity arrangement for use by tax-exempt (non-profit) organizations to provide retirement benefits for their employees. They cannot invest in limited partnerships.
What are non-qualified deferred compensation plans?
A contract between an individual and their employer to defer compensation as agreed upon between the two parties. High paid athletes and execs reap the most benefits from this type of plan. The risk is, if the business fails, this could lead to no payments as plan assets could be subject to the company’s creditors.
What are private, non-governmental 457 plans?
They are used for hospitals, unions, and charitable organizations and generally limit participation to a select group of management or highly compensated employees. (ERISA Title I)
